India’s five-year plans (FYPs) highlighted the import substitution policy under India’s inward-looking strategy. This meant that the goods that can be produced domestically should be produced domestically rather than importing from the foreign market. The domestic producers could thus sell their products in the Indian markets without any foreign competition. The main aim here was to boost the economic growth of the nation and achieve self-sufficiency. Such an economy is also known as a closed economy. Up until the 1990s, India chose to remain as a closed economy.

The system of import substitution and import restrictions was implemented with the help of a number of different methodsー through the imposition of a) Tariffs, b) Quotas.

Extremely high tariffs were levied on imported goods making them very expensive for the Indian consumers. This eventually forced them to buy goods that have been made domestically rather than the imported items.

The quota system led to the fixing the maximum limit on the imports made by a domestic consumer. Only a certain amount of very essential items such as raw materials and capital equipment were allowed to be imported and used. That means, if the producers wanted extra materials, they had to fend for themselves.

No doubt that the inward looking strategy brought a rise in the foreign trade sector with the domestic producers gaining exponentially but towards the early 1990s, the Indian law makers realised that there are many loopholes in the current foreign trade policy that they adopted. The main problem was that the domestic producers made no sincere efforts to step up the quality of their products, forcing the Indian consumers to purchase whatever was supplied by them.

In 1962, a review committee was formed to discuss the changes required in the government’s existing foreign trade rules and hence, in 1985, then Finance Minister V.P. Singh announced the EXIM Policy (short for Export-Import Policy) which formulated the export and import policies of the country. Initially, the policy was meant to be followed for a period of three years. Later from 1991, the policies were revised every 5 years in view of the changing international economic context. The EXIM policy came into being to get a better view of the trade situation of the country and to correct trade deficits, if any.

In the year 1991, India received a major setback. The Indian government availed a loan of $7 billion from the IMF (International Monetary Fund) and the World Bank due to its inability to manage the economic condition of the country. In order to avail the loan, these international agencies expected India to liberalise, privatise and globalise its economy. The Indian government thus announced the New Economic Policy (NEP), popularly known as the LPG (Liberalisation, Privatisation, Globalisation) policies. Under the New Economic Policy, quantitative restrictions that were imposed after independence were substantially removed. For example, by the year 2001, import restrictions on manufactured consumer goods and agricultural products were completely eliminated. Similarly, tariffs were removed to a great extent in order to increase the competitiveness of the domestic goods in the foreign markets and to improve the quality of the products.

The first EXIM policy came into effect in 1992 and was effective until 1997. This policy aimed at removing the various protectionist measures that were taken by the Indian government previously. After that, the second EXIM policy started in the same year (1997) and stayed up until 2002. This time the focus was on making India a globally oriented economy through the adoption of a set of schemes such as the Export Promotion Capital Goods Schemes and Advanced License Schemes aimed at increasing investments from abroad. The next EXIM policy emerged after 2 years i.e. in 2004 up to 2009 (major trade decisions were taken under this EXIM policy which is why it is also called the ‘Trade Constitution’), under which newer policies such as Target Plus which focussed on providing incentives to producers and exporters with duty-free credit and Free Trade Zones. Soon after, the fourth EXIM policy came into effect from 2009 till 2014 which brought in new initiatives known as Focus Market scheme and product market scheme to help exporters compete in foreign markets and incentivise the export of those products which have high employment intensity. The fifth EXIM policy came after one gap year and came into effect in 2015 and stayed till 2020. This policy focussed on the export as well as the manufacturing services to improve the ease of doing business to increase India’s exports and thus increase its participation in the global market.

Fig 1. Imports of goods and services (% of GDP) – India | Source: World Bank

Fig 2. Exports of goods and services (% of GDP) – India | Source: World Bank

On March 31, 2020, the Government of India decided to extend the Foreign Trade Policy 2015-2020 for one year in light of the Covid-19 situation. It was to expire on March 31, 2021, but the Directorate General of Foreign Trade (DGFT) again extended FTP 2015-20 up to September 30, 2021, and it has been operational since.

References:

1. Arora, S. (2019). What are the objectives of Foreign Trade Policy in India? Legodesk. https://legodesk.com/legopedia/foreign-trade-policy-india/

2. India’s International Trade Policy – EXIM Policy. Economics Discussion. https://www.economicsdiscussion.net/international-economics/indias-international-trade-policy-exim-policy/4241

3. Soares, N. (2014). Foreign Trade Policy of India since 1980. Slideshare. https://www.slideshare.net/NikhilSoares/foreign-trade-policy-of-india-since-1980

4. Saluja, N. (2021). Govt extends current foreign trade policy till September. The Economic Times. https://m.economictimes.com/news/economy/foreign-trade/govt-extends-current-foreign-trade-policy-till-september/amp_articleshow/81777971.cms

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Historical Context

Observations have shown that with the onset of the Age of Discovery in Europe, increased interest of Russia and China in Central Asia somewhat led to the breaking away of India’s connections with the region. Even after Independence, India’s foreign policy majorly focused on its immediate neighbours, or solidarity-based relations with the African countries, or even robust economic ties with Russia — but, the partitioning of the Indian subcontinent and the distancing of the region geographically did play a role in the deterioration of the relations with the region from India.

Further, in the post-Cold War era, after the Soviet Union split Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan in the 1990s, India took upon the task of developing its relations with the resource-rich region while also undertaking its own domestic economic reforms of bringing about liberalisation, privatisation, and globalisation. Former Indian Prime Minister P.V. Narasimha Rao visited four out of the five republics – Uzbekistan and Kazakhstan in 1993, followed by Turkmenistan and Kyrgyzstan in 1995. In addition to the collective values that India shared with the countries, collective development and economic growth, as well as formulating approached to combating common threats such as terrorism, religious extremism, and crime that these nations shared with India. A few experts also believe that the stage which was set by these conversations was even reflected in India’s Look North policy of recent times. 

Despite the historical links with the Central Asian Economies and India moving quickly to establish diplomatic ties with Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan after their emergence as independent countries almost three decades ago, trade has not grown beyond $2 billion, with them. In recent years, foreign-affairs analysts have begun observing what they call the “New Great Game” in Central Asia — Russia, the US, European Union (EU), China, Turkey, Iran and India are all trying to assert their power and hegemony in the region. Not only does the region provide for a large market, but it also has prospects for developing hydropower, fossil fuel resources, and other lucrative prospects. According to experts, India, for its part, has so far chosen to take the ‘constructivist’ approach. This entails a strategy of, interests are not solely based on economic or strategic benefits but attempt to involve an intersectional and even culture-oriented involvement.

Current Developments

India’s continued interest in Central Asia can be attributed to the geopolitical relevance of the region due to three factors — Chinese presence and influx in the region through its expansionist infrastructure projects like the Belt and Road Initiative (BRI), a continued historical context of Russia’s dominance in the region, and the overall regional security dynamic. Keeping these in mind, India had unveiled its Connect Central Asia Policy in Bishkek in 2012 in order to draw attention to the expansion of the region’s economic interests in congruence with India’s plans of integrating its external neighbourhood.

The lack of connectivity of India with the region of Central Asia has been a long withstanding issue in this context. For instance, the long-delayed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, backed by the Asian Development Bank (ADB), was first proposed in the mid-1990s and all four actors officially signed an intergovernmental agreement in 2010. But, since then, the project has been stalled due to the status of Afghanistan and mistrust between India and Pakistan.

To combat this connectivity gap, India has undertaken positive action in the past as well quite recently. India, Iran and Russia signed the International North-South Transport Corridor (INSTC) agreement which aimed to offer connectivity between India and Central Asia through Iran. As is noted by this resource, while the INSTC is routed via Iran’s Bandar Abbas port, India has also explored the possibility of connecting with Central Asia via Iran’s Chabahar port and thereafter overland corridors passing through Afghanistan. The importance bestowed by India to the Chabahar port, despite the uncertainties which the US-Iran tensions bring to the conversation, can be accorded by the budgetary allocation to the project, which is amounting to INR 1 Billion in 2020-21 announcement.

Way Forward

Since China has been able to leverage its geography, finances and population to ensure that its projects can contribute toward making its dream of a new and improved Silk Road a reality, India is also committed to expanding the scope of its economic relations with the region. India has immense potential in developing small and medium scale industries in the region which is presently being provided through India’s program of ITEC (Indian Technical and Economic Cooperation). The ITEC programme covers information technology, management, journalism, diplomacy, entrepreneurship, and banking. New Delhi also signed the Strategic Partnership Agreements (SPA) with three of the five nations of the Central Asian Economies — Kazakhstan, Tajikistan and Uzbekistan — in order to stimulate defence cooperation and deepen trade relations.

As a report in a Russian newspaper observed, “Indian presence in the region should balance the growing Chinese influence and prevent it from becoming the region of Beijing’s undivided dominance.” This idea can be brought to effect by India by leveraging its membership at the Shanghai Cooperation Organisation.

India and the Central Asian Economies can prioritize energy, pharmaceuticals, automotive, agro-processing, education, urban infrastructure and transport, civil aviation, IT and tourism sectors to strengthen economic links. The Central Asian economies and India have had a long history of association which can be efficiently revived to mutual benefit by the means of strategic and economic cooperation and connectivity, both notions that can be leveraged by the stakeholders in a post-pandemic world.

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With that framework, the minority population established segregation among housing, education, and all spheres of life, creating three nations: one of the whites [comprising of people groups essentially of British and Dutch [Boer] family line, who battled for ages to increase political supremacy, a battle that arrived at its violent peak with the South African War of 1899–1902); one of the blacks (comprising of such people groups as the San hunter and gatherers of the north-western desert, the Zulu herders of the eastern levels, and the Khoekhoe ranchers of the southern Cape districts); and one of “Coloureds” (blended race individuals) and ethnic Asians (Indians, Malays, Filipinos, and Chinese).

The politically-sanctioned racial segregation system was despised and even fervently opposed by much of the world, and by the mid-1980s South Africa ended up among the world’s pariah states, the subject of financial and social blacklists that influenced pretty much every part of life. In the need compelled to stand up to the unsound idea of ethnic separatism in a multicultural land, the South African government of F.W.de Klerk (1989-94) started to rescind politically-sanctioned racial segregation laws. That procedure thusly set moving a change towards universal suffrage and true electoral democracy, which finished in the 1994 election which the appointed the long-imprisoned leader Nelson Mandela. This change witnessed the nation gaining social equality in a brief timeframe. South Africa has three cities that serve as its capital: Pretoria (executive), Cape Town (legislative), and Bloemfontein (judicial). 

ECONOMY

The economy of South Africa took a drastic turn in the late 19^th century when jewels and gold were found there, followed by large investments from foreign capitals. In the years after World War II, the nation formed a much-developed manufacturing base and encountered exceptional development rates, and at that time its development rated were most noteworthy in the world.

However, South Africa has encountered economic problems since the late 1970s because of the apartheid policies which led may countries to holdback investments and to impose international restrictions against it. South Africa’s economy didn’t quickly bounce back in the mid-1990s while apartheid was being disassembled, as capitalists held on to perceive what might occur. After the 1994 democratic elections, the investments poured in. Post-apartheid South Africa was then confronted with the issue of incorporating the recently disappointed and mistreated greater part into the economy.

In 1996 the legislature made a five-year plan—Growth, Employment, and Redistribution (GEAR)— that concentrated on privatization and the evacuation of trade controls. GEAR was successful in accomplishing a portion of its objectives yet was hailed by some as establishing a significant framework for future financial advancement. The government additionally executed new laws and projects intended to improve the monetary circumstance of the underestimated larger part. The Black Economic Empowerment (BEE) was introduced, it aimed to increase employment opportunities for those who were characterized under apartheid as black, coloured, and Indians, enhancing their working skills and incomes. This strategy was further extended through the Broad-Based Black Economic Empowerment (BBBEE) Act of 2003, which attended to gender, social and racial inequality.

RESOURCES AND POWER 

South Africa is plentiful in an assortment of minerals. Other than diamonds and gold it also has a reserve for iron ore, platinum, manganese, chromium, copper, uranium, silver, beryllium, and titanium. Despite the fact that manufacturing has provided employment for decades, contributing towards the Gross Development Product (GDP) than mining, the mining segment keeps on shaping the centre of the South African economy as it holds companies to invest in other economic activities. Gold remains the most significant mineral—South Africa is the world’s largest producers—and stores are enormous; in any case, creation is gradually declining, and costs have never risen to their stupendous highs of the mid-1970s.

EDUCATION 

Since 1994, South Africa has made incredible walks in understanding the right to education, quickly fabricating an effective, available and quality education system for youngsters and youths. This outstanding advancement has been recorded over the three parts of fundamental training in youth improvement, primary and secondary education. However, notwithstanding these accomplishments, the possibilities and openings stood to kids in South Africa are still generally dependent upon which side of the inequality they were born. Poverty and Inequality stay cruel determinants, forestalling such huge numbers of kids from getting to the fundamental education that they deserve.

From birth to the last year of high school, kids born in poor family face a lot of challenges, which their co-students coming from a wealthy background may not. While access to ECD centres has expanded, the nature of learning and development programmes remain at test. An underqualified workforce paired with the poor implementation of the learning programmes sways ECD results. While giving quality learning and basic education has its difficulties, keeping youngsters in school to finish their education is another. A little more than a fourth of South Africa’s total children drop out of school before the finish of Matric – most of whom are from helpless territories and defenceless against various boundaries to education. This disparity of access is compounded by a sexual orientation imbalance that impacts little youngsters particularly.

SOUTH AFRICA AND ITS DIPLOMATIC RELATIONS

The Ministry of Foreign Affairs is answerable for South African foreign policy strategies. The Department of Foreign Affairs (DFA) inside the Ministry of Foreign Affairs conducts contact with foreign governments and international associations on all issues influencing official relations. These relations are led through foreign government authorities, through representatives licensed to South Africa, and through South Africa’s authorized embassies, departments, and different missions abroad. Until the mid-1990s, the DFA and the conciliatory corps went up against various counter-establishment “strategic administrations” run by antiapartheid associations in a state of banishment, particularly the ANC. The point of these equal correspondence channels was to disconnect the South African government inside the global network as a method for forcing Pretoria to abrogate apartheid. 

After the abrogation of apartheid and the initiation of the democratically chosen Government of National Unity, South Africa’s foreign relations significantly transformed. The nation’s discretionary segregation finished, and existing relations with different nations and with international associations improved. South Africa restored discretionary and trade relations with numerous nations, especially in Africa, and set up new relations with some previous approvals “hardliners”, for example, India, Pakistan, Bahrain, Malaysia, Jordan, Libya, and Cuba. A few provincial and international associations welcomed South Africa to join or to renew its membership, including the Organization of African Unity (OAU), the Southern African Development Community (SADC), and the United Nations (UN).

In addition, South Africa participated in international and bilateral sport, academic, and scientific activities, often for the first time in decades. Relations with the nations of the previous Soviet Union, Eastern Europe, and Central Europe improved. South Africa had full political binds with thirty-nine nations in 1990; that number expanded to sixty-nine out of 1993, and to a maximum of 147 in 1995. Various foreign policies were brought into action before Nelson Mandela was appointed as President in 1994, for example, in mid-1994 de Klerk and Mandela, alongside the leaders of Botswana and Zimbabwe, interceded a conclusion to a military revolt in neighbouring Lesotho. In mid-1994, South Africa gave its first help to a UN peacekeeping activity when it provided medical clinic hardware for Rwanda. Likewise, in 1994, President Mandela consented to help settle the unmanageable common war in Angola, although he advised against unrealistically high expectations in this and other profound established political and ethnic clashes.

INDIA- SOUTH AFRICA RELATIONS

India’s relationship with South Africa is both fundamental and remarkable, going back a few centuries and is tied down in common ideals, ideas, interests, and icons – like Mahatma Gandhi and Nelson Mandela. In any case, their respective relationship stayed stressed for quite a while because of South Africa’s apartheid government. After its independence, India began its struggle for the position at international associations like United Nations (UN), Commonwealth, and Non-Aligned Movement (NAM), and was the main nation to have trade relations 1946, and in this way forced political and financial assets. Following a hole of four decades, India restored exchange and business ties in 1993, after South Africa finished its standardized racial isolation. In May 1993, a Cultural Centre was opened in Johannesburg. In November 1993, strategic and consular relations were re-established during the visit of then South African Foreign Minister Pik Botha to India. The Indian High Commission in Pretoria was opened in May 1994. In 1996, India opened its permanent Office of High Commission in Cape Town, which was re-assigned as Consulate General of India in 2011.

India and South Africa’s shared basic encounters and aggregate quality have formed how the two of them see the world together. As two countries who have shared their battle to independence, the obligation to improve the lives of others is inserted inside India and South Africa’s consciousness. After South Africa established democracy in 1994, it was the Red Fort Declaration on Strategic Partnership among India and South Africa, marked in March 1997 by then PM Shri Deve Gowda and Nelson Mandela, which set the boundaries for a revived relationship. The twentieth commemoration of marking of the revelation was honoured by an India-South African social spectacle involving music and dance performances, and an occasion composed by High Commission of India, Pretoria on April 9, 2017. This Strategic Partnership between the two nations was again re-certified in the Tshwane Declaration (October 2006). Both these announcements have been instrumental components that have contributed in the past to both South Africa and India for accomplishing their national objectives.

List of MoUs signed during the 10^th BRICS Summit, signed between India and South Africa were;

• Memorandum of Understanding between the Indian Council of Agricultural Research, New Delhi, India and the Agricultural Research Council, Pretoria, South Africa on Agricultural Research and Education.
• Memorandum of Understanding between Government of the Republic of South Africa and Government of India regarding the setting up of the “Gandhi Mandela Centre of Specialisation in Artisan Skills” in South Africa.
• Memorandum of Understanding between Indian Space Research Organisation and the South African National Space Agency on Cooperation in the Exploration and Uses of Outer Space for Peaceful Purposes.

South Africa can use its diplomacy not only at governmental but also as a non-governmental level. Utilizing scholastics and specialists outside of government to “include” information and ability to South African discretion, have gotten progressively normal. It is to be trusted that this training will proceed to help give what is expected to compelling interest in an inexorably intricate world. Thorough training of professional diplomats is, however, not unimportant either, and such persons should be retained for the foreign service to establish an ever-growing pool of experience in the DFA. These are on the whole parts of the “small scale level” of strategy and fundamental if the nation is to prevail at the global level. 

Moreover, thought should be given to the decision of various types of diplomacy and their blend; an inappropriate decision can have genuine results, as the Nigerian debacle would delineate. The topic of what balance ought to be kept up among respective and multilateral discretion has been raised; summitry should be utilized wisely; a fitting job for innovation in diplomacy should be discovered; the degree to which the nine areas or locales in South Africa can be permitted to lead their foreign relations should be considered; and, troublesome decisions should be made in regards to accentuation on various regions. Prioritising in diplomacy appears to be unavoidable as the conceivable outcomes are practically unfathomable, though the assets are quite restricted. This isn’t a difficult extraordinary to South Africa. 

The South African government is no world-exhausted system which has seen everything previously, but a youthful, excited organization anxious to show its gifts and beliefs. The government believes in the excellencies of relationship, co-activity and human qualities. It has understood that the present chiefs should be acceptable ambassadors who can adjust domestic and international pressure, who can make arrangements, and resolve debates, characterizing the interests of their states in harmonious manners.

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Coronavirus (CoV) is a large family of viruses that causing illness ranging broadly in severity. It ranges from the common cold, fever to more severe diseases like Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV).

Along with all other serious problems related to the coronavirus, we can’t ignore the fact that outbreak of COVID-19 in China is expected to have a considerable impact on the global economy including economic slowdown, foreign trade, supply chain disruption, commodities, and logistics. 

Impact of the Coronavirus in India…

To control the toll, the Indian govt has taken some severe steps towards it. Govt has decided a complete social and economic lockdown of India for the next 21 days, i.e, from 24 Mar to 14 Apr, to contain the spread of coronavirus. The Indian economy was already staggering under a falling demand, high unemployment, and decrement of industrial output and profits, all of which happening together for several quarters. Now the lockdown would severely impact the supply side of the economy, i.e, production and distribution of goods and services, except for the essential items that are exempt. Both production and distribution of non-essentials have come to a suspension. This impacts at least 55% of the economy for 21 days lockdown or about Rs 2 lakh crore. It may even be more due to previous partial lockdowns by various state governments. The impact of the move will spill over to FY21, which begins on April 1. Although India may not fall into a recession, unlike the eurozone, the US or Asia-Pacific major trade contacts with china, yet the effect on the GDP growth will be significant. 

The quarterly GDP growth has been consistently falling since Q4 of FY18; from 8.1% in Q4 of FY18 to 4.7% in Q3 of FY20. 

Major rating agency like Moody’s sharply slashed its previous projection for India’s GDP growth in FY20 from 5.3% to 2.5%. Crisil slashed its base case GDP growth forecast for India in FY21 from 5.7% to 5.2%. It warned that there are greater downside risks if the pandemic is not contained by April-June 2020, or if it spreads rapidly in India, affecting domestic consumption, and investment(source). 

On Mar 26, Finance minister Nirmala Sitharaman announced a $23 billion package pointed at cushioning the panic. A day later, RBI and central banks also made a sharp interest rate cuts. CLSA reported pharmaceuticals, chemicals, and electronics businesses may face supply-chain problems and prices will rise by 10%. The report also tells that India could also be a recipient of positive flows since it appears to be the least-impacted market. 

Let us take a look at the sector-wise impact on Indian industry:

Chemical Industry: China is a major supplier of Indigo that is required for denim. It was found that 20% of the production has been impacted due to the disruption in raw material supply.

Shipping Industry: Coronavirus outbreak has impacted the business of cargo transportation service providers. Per day per vessel has declined by more than 75-80% in dry bulk trade. 

Auto Industry: Indian carmakers imports between 10-30% of auto parts from Chinese firms. It is expected to result in an 8-10% contraction of Indian auto manufacturing in 2020 if the threat of coronavirus stays longer.

Pharmaceuticals Industry: China is the world’s largest exporter of active pharmaceutical ingredient (APIs) and intermediates. Approx. 70% of India’s total API requirement is met by imports from China.

Textiles Industry: India exports around 20-25 million kg of cotton yarn a month to China. Due to the coronavirus outbreak, several industries in China have stopped operations. Cotton yarn prices have fallen by 3-4% in the domestic market. 

IT Industry: The 3 weeks lockdown period adversely impacted the revenue and growth of Indian IT companies.

Tourism and Aviation: Due to the coronavirus outbreak, airlines and tourism services are suspended that will impact the tourism sector and revenue.

The Federation of Indian Chambers of Commerce and Industry (FICCI) said (that there was a strong hope of economic recovery in the last quarter of the current fiscal. However, the coronavirus epidemic has made the recovery extremely difficult in the near to medium term(source). 

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